1. dollar value of all final goods and services produced within a countrys border in a given year

2. includes all companies in America no matter what country it originated from

3. any product produced or sold in America

non-residential fixed= creation of tools and equipment to use in the production of other goods and services: buliding a factory

residential= new homes and apartments

invenrtory changes= level of amount of goods necessary for production and finished goods ready to be sold. increase stock in store

anything that the government spends money on

-Does not include: Social security, unemployment compensation, welfare , transfer of payments

expressed in constant prices using one years price as a base price

- used to compare different years of gdp

-gdp does not measure goods and services that people do for themselves, gdp rises when peple pay someone else to do these things for them.

Such as: lawn care, childcare, cooking dinner

when nonmarket activities are shifted to the market gdp is pushed up somewhat even though production has not really increased

illegal drugs, weapns, stolen goods, cars

unintended economic side effects have a monetary value that often is not reflected in GDP

example steps a company takes to produce less pollution

pleasant surroundings, ample leisure time, personal safety. Gdp measures output and income within an economy not individuals quality of life

1. nonmarket activity

2. underground economy

3.negative externalities

4. quality of life

consumer goods and services

- includes durable and nondurable goods

1. business goods and services

2. government goods and services

3. net exports or imports of goods and services

1. the annual income earned by u.s. owned firms and u.s. citizens

2. market value of all goods and services produced by americans in one year

3. all american companies no matter their location

1. expansion

2.  peak

3. contraction

4. trough

6 to 8 months

-negative real economic growth for two or more successive quarters

-marked by rising unemployment (6-10%)

-businesses expand by producing more or investing in their company= economic growth

- businesses decrease production= economic contracts

- fear of weakening economy cause consumers to hold on tightly to their money and possibly cause the contraction that they feared

- opposite can also occur: people expect and expanding econom and therefore spend more

- low interest rates encorage people to spend more money and expand the economy

-rising rates reducre output and make unemployment rise

-raise and fall of borrowing rate has a great impact on spending and real gdp

external shocks

-unexpected events that cause decrease or increase in aggregate supply

- negative: war, oil embargo, natural disaster

-positive: discovery of large mineral deposit, perfect growing season

- determines how productive a country is look at population growth, gdp might increase because of an increase in population instead of more productive economy

- real gdp must keep up with the growth rate of the population if it is to satisfy the needs of the growing population

- shows quality of life

saving in a bank or mutual funds allow businesses to grow their companies

someone looking for a new job

- examples laid off, leaving a company,graduating student

- unemployment insurance may contribute slightly to this type of unemployment : a worker receiving unemployment insurance faces less financial pressure to find a new job immediately

  Occurs as a result of harvest schedules, vacations, or when industries slow or shut down for a season

                                                             ii.            Examples:  landscapers, construction

                                                            iii.            Government does not try to get rid of this because it is normal and a healthy part of the economy

1. develpoment of new technology
2.  discovery of new resources
3. changes in consumer demand
4. globalization
5. lack of education 

 i.            Worker’s skills do not match the jobs that are available

      ii.            When structure of economy changes, the skills that workers mush have in order to succeed in the economy also must change

    iii.            Examples: factories where machines take over

Rises during economic downturns and falls when the economy improves

    Rises during contraction

    Falls during expansion

           Government tries to minimize this;  worst case was during the Great Depression which brought about unemployment insurance

1. The amount of unemployment in the nation is an important clue to the health of the economy
2. Each month the census bureau surveys families from this poll the Bureau computes the unemployment rate = the percentage of the nation’s labor force that is unemployed

1. 4-6% unemployment shows healthy economy from employment stand point
2. Full employment = nearly everyone wants a job, has a job
3. Underemployment = working a job that one is over-qualified for,  or working part time when they desire full time work

ability to purchase goods and services

                                                               i.      As prices rise, purchasing power decreases

1. Measurement that shows how the average price of a standard group of goods changes over time.
2. Price index produces an average that economists can compare to earlier averages to see how much prices have changed over time
3. Groups & Individuals:  use this to adjust saving habits
4. Government;  uses price indexs to make economic decisions

determined by market basket

1. By looking at CPI consumers, businesses and the government can compare the cost of a group of goods this month with what the same or similar group cost months or even years ago.
2. CPI is used to calculate inflation rate

creeping

chronic

hyperflation

1. Creeping

1. Chronic

1. Hyperflation

quanity

demand pull

cost push

1. Purchasing power decrease
2. Income is eroded if wages are not increased to counteract inflation
3. People receiving interest on money in savings accounts must take inflation rates into consideration. If someone is making 8% interest on a savings account and the inflation rate is 3% that person’s savings increased that year by 5% not 8%

• How does the U.S census Bureau define a family? 

A family = a group of two or more people related by birth, marriage, or adoption who live

in the same housing unit.

A household is all the people who live in the same housing unit, regardless of how they

are related

• What group has most of its members in poverty?

• Poverty line for family of 4: